About this Show

Squawk Box

News/Business. Becky Quick, Joe Kernen, Andrew Ross Sorkin. Business news and talk as the trading day unfolds on Wall Street. New. (CC)

NETWORK

DURATION
02:59:54

RATING

SCANNED IN
San Francisco, CA, USA

SOURCE
Comcast Cable

TUNER
Virtual Ch. 58 (CNBC)

VIDEO CODEC
mpeg2video

AUDIO CODEC
ac3

PIXEL WIDTH
704

PIXEL HEIGHT
480

TOPIC FREQUENCY

Cyprus 84, Europe 43, Us 37, U.s. 22, Italy 14, Eu 13, Spain 12, Michelle 10, United States 10, Joe 10, S&p 9, Pimco 7, Becky 7, Scottrade 6, Hertz 6, Imf 5, Jim O'neill 5, Germany 5, Jim 5, France 5,
Borrow a DVD
of this show
  CNBC    Squawk Box    News/Business. Becky Quick, Joe Kernen, Andrew Ross Sorkin.  
   Business news and talk as the trading day unfolds on Wall...  

    March 18, 2013
    6:00 - 8:59am EDT  

6:00am
6:01am
good morning. one controversial weekend bailout. tend result? euro fears re-ignited. global markets under pressure because of cyprus? a golf course? it's monday, march 18th, 2013, and "squawk box" begins right now. good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe
6:02am
kernen and andrew ross sorkin. there is one top story this morning with many ripple effects. this weekend, the eurozone decided to force bank depositors in cyprus towards a bailout. yesterday, pimco's bill grows tweeted sell euro, as well. people were listening and the market was already ahead of him at that point. the euro right now is trading at 1.2961. but the biggest drop we've seen since january 2012 came in the euro and this is after a sell-off that we've seen since february, where the euro has been under pressure. again, the euro was down by 1.3% in trade. right now, the european markets, you're right, aren't reacting terribly to this. france, the cac is the worst performer, down 1.1%. overnight in asia, there was a market sell-off. the nikkei was down 2.7%. markets quaking. that's just the idea that you'll
6:03am
be seeing depositors taken away from -- >> everywhere. >> right. >> this is -- >> a run, say the "r" word. >> a bank run. if it happens in sigh before us -- >> this is not -- >> at the beheft of the european union, this is coming because of what they're saying that they want this shored up. it means bank depositors everybody where should be concerned. >> seems like a nice play. it's not the golf course. but it's a decent place. but does it deserve this? >> what a great idea, though. >> oh, no. i'm going to get you with this. we're going to talk about this. >> we shouldn't even be joking around about this. this could be the destabilization of the european financial system. if you had money in an eu bank, would you leave it in there? >> it's really that much different than obama care? you're sure? >> yes. >> really? >> yes. >> we're pretty -- our idea is why not take for the preschool program, take 10%, why not pay
6:04am
for solar energy and alternative energy development? why not pay -- if obama gets started on this -- >> joe and i have agreed that we're going to compensate -- what do you want to see, 20%? >> we'll start at 20. we'll start at 20. >> as we spend it all, we're going to need more. we're going to need the preschool, we're going to need solar energy. >> i thought i was completely wrong this what it was. >> it's an island, isn't it? >> it's an island. >> but it shows you how interconnected it is. >> i know. and fait accompli, he said i got there and is they were doing it. >> what if you found out that your bank got taken over by the fdic and the insurance that you thought protected your money was not there, that it was wrong? that's the problem. >> and by the way, 10% of your money is gone, too. >> explain to the eurozone just
6:05am
waking up exactly what -- >> carolin is going to do that supposedly when we throw to her. >> they have to do something. >> they follow twitter. >> did you wear your jacket last week? >> no. >> will you write down all of the key deferences for obama care for me? >> what do you mean? >> no, i want her to actually -- no, i want to see the difference. explain to me. >> all right. go ahead. >> well, we've been watching some of the other markets. we told you what happened in japan overnight. you saw what happened in europe. take a look at the futures here. dow futures down by 80 points. s&p 500 futures are down, as well. this comes after weeks of the dow and the s&p marching towards new highs every day.
6:06am
you can see right now that the ten-year at this point is yielding 1.944%. oil prices did come under some pressure, even though they've been pushing higher on friday, you can see they're down. this is part of what happens when you see the euro coming under pressure on a stronger dollar. take a look very quickly at gold prices this morning. they're up by close to $10. 1602 an ounce. cnbc has a team of reporters covering every aspect of the cypress story this morning and is can why it matters so much to the global markets. we're going to talk about it. carolin roth is in cyprus, julia is in rome where she's planning on covering the italian parliament and spending the weekend following what has happened out of brussels and sat down with cyprus's finance minister. we also have michelle caruso cabrera here in new jersey. you should be somewhere, right? >> we had a long discussion about it. >> all of these fantastic reporters -- >> couldn't find any five-star hotels there, right?
6:07am
>> you've got me figured out. >> we're going to connect all the dots and figure out what may happen next. first, let's start with julia for a recap of how the entire story line went down for those who are not in the know this morning. julia. >> morning, guys. yes, well, in the early hours of saturday morning, we got wa arguably looks like a game changer in the european's response to bailout in the eurozone. of course, there are many aspects on this. the russian involvement, just the sheer size of the cypriot banking sector, almost eight times the size of the country's gdp. but what we heard on saturday morning was, yes, there will be a bailin of depositors and that levy that's going to be imposed to them was already frozen. the first question then, of course, is what happens to the remaining cash? are depositors able to remove that cash when the banks open tomorrow? it's a bank holiday in cyprus
6:08am
today. and that was a question i posed. >> absolutely. there is no capital restrictions. people can move. we hope people will believe us. they will belief the collective leadership of the european union, that this was a necessary step, but single shot at the problem in that from now on they can be very confident that nothing will happen to their savings. >> now, it wasn't just a bailin of the depositors, but also a bailin of junior savings holders. now, the officials on saturday morning made it clear that currencies that have had a bailout deal, they're already funded so it couldn't, them, happen in those countries. of course, spain, they've got a hundred billion euros on tap for
6:09am
their banking sector, but it does raise questions about the concern of depositors in other countries. of course, the ecb made very clear that they're a back stop, but the key question for cypress now, given that this is a brand new government, they've only been in town for three weeks and they made an ex politicsit promise that they wouldn't hit depositors, that's going to be the key issue. can they pass it through parliament? carolin roth is the best person to speak to you about that. >> julia, thank you so much for that. everyone here in cyprus is anxiously waiting for that vote on a very controversial bailout deal. now, i should mention that at this point, the ruling party under the president does not have a clear majority in parliament to be able to push through that controversial vote because press reports are indicating that up to three parties could be voting against that bailout deal because of that deposit tax component.
6:10am
now, the president is currently meeting with the leaders of the political parties. of course, what he's trying to do is to strong arm and to persuade them into voting for that deal because the other alternative, yes, that is bankruptcy for this country, which has only 1 million people and only makes up 0.2% of the entire eurozone. the debate and the vote on that bailout deal will be kicking off in around four hours from now at 4:00 p.m. local time. thou, a lot of uncertainty as to what the outcome of the vote will be, given that nobody has a clear majority. having said that, there is, of course, the chance that some of the lawmakers who have been wavering could have been appeased by the talk that some of the taxes for the smallest depositors could be lowered. now, "the wall street journal" has reported that those deposits between zero is and 100,000 euros could be taxed at only 3%
6:11am
as opposed to 6.75% previously. now, the middle bracket would be 100,000 to 500,000 euros. that could be taxed at 10% and then anything in excess of half a million euros would be taxed at 15%. but there is a chance, of course, that this is too little too late because confidence has already been shattered here in cypress. back over to you guys. >> all right. carolin, thank you very much. michelle is here with us on set. michelle, for the u.s. investor, we start looking at these things, try to figure out what it all means. >> they violated the insurance threshold. like i said before, imagine you have your money in a bank in the united states. the fdic comes in and takes it over. because it's failing. and they tell you, oh, by the way, you thought you were protected up to 250,000. you're not. so the reason why people are worried about runs across europe is they see this and they think, oh, my god, could that happen to
6:12am
me here in italy? could that happen to me here in spain? >> do they have the equivalent of an fdic there? >> it's country by country, by cypress had a 1100,000 threshold, so they violated this threshold. so this new theme, it doesn't matter. it's still the violation of that trust that you thought you had in the bank. the second thing that's happened is they violated the capital structure. how do things work here in the united states when you're busting up a bank? you start blowing through the bottom, right? you blow through the equity, blow through the junior debt, blow through the senior debt and then you go after uninsured depositors. they didn't do that here. they said they're going to hit the junior bondholders, but they haven't said by how much. and they also had said zero about senior bondholders. some reports say the senior bondholders are not going to get hit. my reporting indicates that that is not decided yet. it's still possible. here is what you need to know, though. that amount of money is inconsequential. because of the way the banking structure is happening in
6:13am
cypress, it didn't matter if you went through the junior and the senior. >> there wasn't enough money. >> there wasn't enough money. >> okay. but if they did it in an orderly fashion, that would be a very different story. >> you have legal stability which we haven't seen yet in the eurozone crisis. now, the banking system in cypresig cyprus is eight times the size of the gdp. that is an enormous difference. it is on average in europe 300% times the gdp. if we in the united states had a banking system equivalent to the size of our gdp, do you know how many more jpmorgans we would need? >> how many? >> 45. okay. so their banking system was huge. now, the banks are bust in cyprus. why? because they bought up a lot of greek debt. not the greek debt that dan loeb bought post restructuring, but they bought the other stuff because they were convinced that
6:14am
the european union would never force restructure. so they made really bad betts. thou, here is the other thing. they've been asking for a bailout since june. if you are a wealthy russian oligard who has all your money in cyprus and you've kept it there, it's because you've been betting that they would never hit the deposits. so the germans look at this and they said 70 billion of deposits, 35 billion in accounts above 100,000 and they know based on the data flow that it's a lot of russian money, russian politicians and russian oligard. you as a german taxpayer, do you want to bail out a russian oliguard? the russian oliguards have been betting that's exactly what you would do. >> when you do something like this, you're going to have unintended consequences and future questions about anybody looking at this saying, this time it's about the russian oligard. but if you don't follow some rule of law on these --
6:15am
>> one more thing, barclay's, one of the few houses putting out research over the weekend put out this bar chart to show the size of the relative costs of banks bailing out the banking system based on gdp. look at cyprus. it is so outside. ireland comes next and greece. spain, italy. they don't even come close. there's 600 billion euros of senior debt in italy. >> three practical questions. first, there's a bank holiday today. there's a bank holiday technically tomorrow. >> probably. >> if you want to get your money out of cyprus, you can't. >> impossible. >> two, when there was a crisis in -- when we thought there was a true crisis going on in italy and spain, corporationes and some institutional investors put their money in, but retail did not for the most part. so what happens in cypress and what happens across the board? even in the u.s. whether we have -- it's called runs. >> why do you touch anybody under the insurance level, though?
6:16am
>> i agree. that's where the writing comes in. >> if you have your money in europe, it's not so clear to me that you run with your money so quickly. if you're a russian oliguard you might run with your money. but you're not running tomorrow. you might be running over the next couple of weeks, months, it's a different thing. >> i agree. >> so it's not like we're going to see some massive lines around the banks. but we have seen that around atms in cyprus. >> but not thus far in italy and spain. >> i've seen people quoting thomas spain and how it's inalienable. we've seen that. it's fought like that over there. i think that's part of american exception. >> but it's not going to be voted on. >> let's say someone says you can't drink a sugary drink over 16 ounces. we have people that come in to you and say, you're an idiot. you cannot do this and thank god. >> you were on vacation when that happened, right? >> i watched it and i was
6:17am
drinking big gulps. >> whole sugar cokes, not diet. >> but watching bloomberg trying to explain -- and the way the judge said -- >> it's impossible to enforce. >> i can't believe, this does show the difference between us and -- theory over there like we're going to confiscate 10% of your deposits. fought the way it is now. >> in it's above the threshold, it's fair game. it's fair game. >> what's the chance this happened? >> but wipe out the shareholders, take what the depositits are over the -- >> because they're still nutty about hitting the senior bank debt holders. they think it's going to cause some kind of cataclysm, as if this wouldn't. >> this is worse. >> this could have gone only after the senior, the people above the threshold, that would have led to a tax of 15%, 16%, 17%. it would have been extremely
6:18am
high. you want to tell the russian oligard you're tig 17% of his money? >> i don't see the difference between that or taking 12%. >> i agree. but apparently the president was deeply insistent that the number couldn't go above double digits. >> the chances that they vote to approve this? >> i can't handicap it. he doesn't control parliament. we make senior election necessary cyprus, and this -- >> so ecb and any other regulators in europe, how do you get your credibility back right now? >> oh, i think they think they have plenty of credibility. what are you talking about? >> what do you mean? >> they have no doubts -- exactly. exactly. >> if they had violated the insurance threshold, i think a lot of people would be saying exactly that. this is brilliant. you're finally get to go where you need to go instead of passing it on, socializing the costs to taxpayers across europe, i.e., germany and the
6:19am
sense. >> we have to figure out our priorities here. >> we're going to talk it out over the commercial break. >> i wouldn't do solar and i wouldn't do like preschool, that program, you know. >> much more efficient way to do a carbon tax. >> look at patti murray's budget and tell me how that is different than what this is. will you do that, too? and get back to me. >> if you were just waking up this morning, global markets under pressure. a lot of fears over this cyprus bailouts. u.s. equity futures at this point are under pressure, as well. you can see right now through down by about 82 points. we're going to slip in a quick break and when we come back, we're going to talk about the state of business in america. stay tuned. [ male announcer ] i've seen incredible things. otherworldly things. but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second. which is good for business. because planes use less fuel,
6:20am
spend less time on the ground and more time in the air. suddenly, faraway places don't seem so...far away. ♪ (announcer) at scottrade, our doncexactly how they want.t with scottrade's online banking, i get one view of my bank and brokerage accounts with one login... to easily move my money when i need to. plus, when i call my local scottrade office, i can talk to someone who knows how i trade. because i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade. awarded five-stars from smartmoney magazine.
6:21am
6:22am
if you are just waking up this morning, it's shaping up to be a very interesting monday. the parliament in cyprus will be talking about the controversial bailout terms to ratify an iu/imf proposal. bank dpoefrts could be rs toed to contribute up to 15% of their savings to fund a euro zane bailout. the euro saw its biggest one-day drop since january of 2012. right you to, the euro is at 1.2957. european equities are under pressure, but the biggest decliner at this point is the cac in france.
6:23am
it's down by 1.25%. in germany, the dax is off by just over 1%. u.s. equity futures have been weaker, as well. the s&p futures are off by 14. >> how many people are in the eu? there's like 19 of 20, aren't there? >> just over that. >> this is crazy. you can't run a union where cypress can be the linchpin in our economy over here. it's ridiculous. >> right. it should be a smaller problem. they could take care of this in other ways. they could print money or -- >> i'm not going to pick a state here. it would probably be a southern state, but a poor southern state cannot take the down the united states. >> a western state because they're not awake yet. but here we are. out of the 22 -- cyprus? >> you thought greece was small, cyprus is -- >> come on, cypriots? i remember some conflicts. i thought it was a golf course,
6:24am
which would be a much bigger problem to me. >> let's introduce our guest host this morning, kenny dichter, co-founder of avian. why do i always mispronounce it? because you've been b drinking it. >> avione is airplane in french and spanish. >> can we get a full shot of this? he's now the chairman of juicepress. i have been drinking this stuff for the past week, virtually, five days. >> and you know what? your skin tone has never looked better. >> no food up until this saturday. you've been doing this now -- >> 22 days. >> i've made my cleanse zero dark 60. i have 38 more days to go. i've lost 20 pounds. never had better energy and just excited to be on it, man. i feel like a new man. >> okay. so -- >> you've had nothing to eat? >> no solid foods. hasn't wafrd. >> is that before it goes in
6:25am
or -- >> joe, it's a very good question. >> by the way, i feel a little closer to kermit the frog these days. >> i want to say, i did this last week. and i was fine. i thought i'd be hung iry, have the jitters. >> you know what i had last night? >> what? >> corn beefed and cashage and potatoes. it was st. patrick's day. >> cabbage, i know. >> i don't like cabbage, it doesn't like me. put you on a three-day cleanse. >> how is that different than having a bunch of cabbage? >> they have one here called drink your salad, right? drink your salad. >> anyway, is this good, kenny? are you making money yet? >> this is good. today we have seven stores. by the end of the year we'll be run rate 35 million bucks with 15 stores. ken lan gone, michael carche came in and i think this business has a billion dollar
6:26am
potential. and i think it's going to be great. >> i want to get back to juices, but i want to -- when i talked to you, i want to talk about wealth and what's going on in this country and, frankly, i don't know if i can connect it to cyprus -- >> we're going to figure out something with cyprus. it looks like the ownership market there is going to go fractional. >> you get a sense right now that in this sort of economy, the u.s. economy, that the wealth effect -- that this wealth effect is working or is this -- it's a temporary rare thing and people aren't feeling it yet? >> there's true the 1%. the 3.5 million people that are worth an investable million dollars or more and everybody else. i think when you see the dow and you see how thin the activity is and how thin the volume is, not everybody is participating in this dow 14,000. so -- >> i even get the sense that it's true 1 is% that you're
6:27am
talking about or the 0.00 -- feel it but that their words are going to revert. >> i would say you have the 1% and then you have the 0.1%. >> the 0.1% doesn't care if we revert. >> yeah. they're not reverting. i think you have a little bit of angst in that $1 million to $5 million band. i think people feel like this isn't going to go on forever. look at cypress. cypress reminds me of butler. could cypress go all the way? right. >> they could or not. >> what i think you're seeing is some anxiety in that $1 million to $5 million band. then when you move it way up, the 5 to 30, probably a 300,000, 400,000 people. i have not seen that group waiver. >> those marquis jets card people. >> those are the cardes and then you go 30 million. 50,000 people in the united states have $30 million or more and those are your -- >> 50,000? >> 50,000. >> the politics right now of taxes on the wealthy. we're talking about so far how
6:28am
it sort of shifted his view on some of this stuff. but also, eddie lampert moving down to florida, there was the report last week john paulson was potentially thinking about puerto rico. >> puerto rico. >> but this whole idea, we always say that -- i always say they live in new york and they don't want to leave. all of a sudden, people -- look at phil mickelson. he was the netjet guy, right? >> he said ta 62% of his money is going to different taxations. so -- >> bill maher, you have to work hard to lose him. >> i'm seeing a change in activity in that special group of people that are driving things. we should have asked michelle about that. she's always on. >> but i'm also seeing, andrew, today, you're 36. 30 is the new 40. >> i like the way you talk about
6:29am
these other tenth percenters as if they're other people. we have to go again. >> coming up, a live report from europe. stocks are selling off in early trading after news about cyprus. . a brand new start. your chance to rise and shine. with centurylink as your trusted technology partner, you can do just that. with our visionary cloud infrastructure, global broadband network and custom communications solutions, your business is more reliable - secure - agile. and with responsive, dedicated support,
6:30am
we help you shine every day of the week.
6:31am
departure. hertz gold plus rewards also offers ereturn-- our fastest way to return your car. just note your mileage and zap ! you're outta there ! we'll e-mail your receipt in a flash, too. it's just another way you'll be traveling at the speed of hertz.
6:32am
good morning. welcome back to "squawk box." our top story this morning, a crisis in cyprus. a little island country. is it in the mediterranean?
6:33am
somewhere over there. sparking another round of euro fear these weekend. the eurozone to force bank depositors in that country to contribute towards a bailout. like a 10% off the top, you've got money in the bank -- >> over a hundred grand. >> and you're taking 10%. right. it's an unprecedented attack on cyprus. it will see small depositors attacked with a lower rate, but greater holdings. it all wreaks of confiscation. when a bank goes bust, depositors can lose all their money. >> but after the shareholders and after the bondholders and the insured losses. >> this does sort of indicate some of the northern european countries have had enough. >> i can understand that, but breaking the rule of law is probably more concerning. >> kelly evans is standing by in
6:34am
london with the full story. and you've moved all your money out of cyprus, right, kelly? >> yeah, joe, i was tantalized by that 7% return. britain is coming out and saying it's going to try and protect depositors as much as it can. the greeks are apparently going to come up with a way to protect you, as well. how is it all going to work? details are sketchy. we're still waiting for the parliament to approve that. italy is down 2.3% today. it is the third biggest economy, second biggest, third biggest in the eurozone. anyway, that's for sure. if you want to know why people are concerned, italy has a primary ser plus, plenty of cater about leaving the eurozone. here is a look t bank stocks across the board. they're concerned about the precedence this is setting.
6:35am
there was only 200 billion worth. that doesn't necessarily mean a move would be off the table. unicredit down better than 5%. guys, after we saw markets initially bounce off their lows, this latest leg down has largely been led by the banks, more than 5% now declined for unicredit. standard of care again down socgen down 5%. spanish banks, italian banks, french banks, even deutsche bank down 3.5%. here is a look at the impact it's had on sovereign trade. if we're supposed to spare the sovereigns, the simplish ten year is back over 5%. an important point here, mark thoughten likes to point out, this trade, this risk off move has as much to do with trade jitters resurfacing in china as
6:36am
in the economy. nymex and brent both down better than 1%. last word i'll show you is the euro. wove seen that catching a little bit of a bid this morning. it's back to flat, but we are at 1.29. this isn't just about europe, it's about europe along with other concerns coming back to the markets in force. >> joining us right now to talk more about this is jim o'neill. he is goldman sachs chairman and an advisory member. jim, you tell us this is this? what kind of ripple effects should we expect? >> i got off the flight sunday morning. i thought my jet flag was leading the story. this has all thoughts of possible consequences. we don't know if it will be agreed by the cypriot parliament. either way, they're not going to put the jeanie back in the bottle.
6:37am
this is a biggie, in my opinion. and in essence, it's basically given even more clarity to many other things. the decisions get made to buy whether germany can get it through that parliament or not. that is the only reason i can vaguely understand why this is happening. not a good sign. >> jim, i think my biggest concern with this is not whether or not this ultimately gets done, not that the idea that cyprus would come up with something like this, but that the eu would back it and go along these things. >> i think it's the only way, you know, shoreless people probably told the rest of them, if it requires more cash, we will not get it through the german parliament. so you have to come up with something like this, particularly because of the perception that there's a lot of questionable money from various places, including russia there.
6:38am
it actually questions an eu law. i was trying to focus on this. despite how they seem to go out of their way to keep the euro alive, slowly there are more and more decisions being made that are stopping cross border flows of capital and across the whole of the eurozone. this is not a good idea after all, in my opinion. >> how do you put the jeanie back in the bottle if you're the eu or the imf? just having done what's happened, having said it allowed, enough to shake people up, how quickly do we see the real ramifications? we're seeing a little bit in the markets today, but as we were
6:39am
discussing earlier, in this case, it's not clear that the run happens literally this morning, but if you're a business or an institutional investor over the next month or two, you might say to yourself, let's start re-evaluating what we're doing here. >> exactly. i have a small investment in a greek insurance business online. and they have a bit of that cash in a cypriot bank. a lot of legitimate business people will say will will it take that request again? people will say that and say on you go and with it, how can you trust what it's supposed to be agreed an eu law?
6:40am
i know, it changes the odds about so many think. as i say, it's all being done. >> where does it money move? >> hm? >> where does the money move? >> well, i think we have to see some of the things, just before coming out, the cypriot banks are going to remain closed all week. so you could v a whole reappreciation all over the world. >> i'm big in singapore. i've got thoughts like that in my head, never mind things just to do about the eurozone. >> unfortunately they can't use our court system. but we have the idea of what private property means. it seems a little bit important in the way we do things over here.
6:41am
i can't imagine that in the uk that -- i mean, a lot of our laws are from the uk and i can't imagine it would happen there. we always talk about how different europe is. this proves it. as a depositor, i would take this to a court and i know i would prevail probably eventually. >> i wouldn't at all be surprised if somebody tries to question this in the court for the reasons you say. certainly here in the uk. i find myself thim thinking more and more, why does the uk want to be part of some thing while they're doing all this part of erratic and very short insular type measures that are basically pulling the plug on the whole grand theoretical aspects of the union and the goods and service. for the uk, it was unique.
6:42am
it's yet another thing. hardly any ascension being paid about this because of this news. this proposed cap on bank bonuses, they're now all about putting on another string to do the same with hedge funds and other asset managers in europe later this week. which in itself is complete insanity. this is the mood of how these politicians are. it's quite understandable why it is, because you get these random decisions made by the sort of elite agility and political class without thinking through the underlying economics, ironically going back to their grand projects of this supposedly free trade and services. >> you don't want to give him any ideas, either.
6:43am
he probably does love this, right? >> well, in some ways, i've got myself into some interesting discussions about this. in some ways, i think it's kwies refreshing about this. stop doing things about the past and get on and realize the world is changing and it needs to do proactive things to be a better and bigger part of this rapidly changing world. and you might need the shock of something like that in a big european -- >> big shake? >> the shape of the status quo. we need big positive changes. >> is this the death now of the euro? is this when we're going to look back and say this is when things started to unravel? >> it's another important thing along the way.
6:44am
it's a rapidly changing world. and germany in particular. more of these guys are doing more and more of the trades of the rest of the world. slowly but surely, the eu is not what it used to be. and if they keep doing things like all of this kind of perceptive measures to keep the show on the road, at the end of the day, people who are wanting a hope and jobs and some exciting future, they're not going to stand for it. ultimately that will be what determines whether it's the bad one or not. not the bad ones. it will be at some point european people. >> and maybe it's the biggest thing, jim, is that the north is fed up. and i saw over the weekend, germany hasn't invested a dime in infrastructure in 20 years. so here they are supporting all
6:45am
of southern europe and maybe this is an indication that they're just fed up. >> europe is openly upset with all of these countries and the european union. leadership has to we more honest about it. all is well. this is sort of the angle i'm talking about. if that's the way they feel about it, why did they accept all of these countries in the first place? you can't have it both ways. >> they were lending them money to buy their stuff, i guess. >> why is germany going to sell all their exports other than china? the answer is nowhere. >> jim, thank you for talking with us this morning. it's always eye opening. thank you for your time. >> thank you.
6:46am
>> he's definitely right about everything, right? >> always. coming up, beyond the crisis in cyprus. later, we've got pimco's mohamed el-erian to tell us why you should be worried about what's happening in europe today if you aren't nervous already. stay tuned. all stations come over to mission a for a final go. this is for real this time. step seven point two one two. verify and lock. command is locked. five seconds.
6:47am
three, two, one. standing by for capture. the most innovative software on the planet... dragon is captured. is connecting today's leading companies to places beyond it. siemens. answers. impact wool exports from new zealand, textile production in spain, and the use of medical technology in the u.s.? at t. rowe price, we understand the connections of a complex, global economy. it's just one reason over 75% of our mutual funds beat their 10-year lipper average. t. rowe price. invest with confidence. request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing.
6:48am
6:49am
take a look at futures. the dow looks like it would open off about 103 points. fass dak would be off about 32 points and the s&p 500 off about 16 points. making headlines this morning, beyond cyprus, airbus is landing a record order of jets from
6:50am
indonesia's lion air. the deal is for $24 billion for 234 planes. also today, president obama is going to be nominating thomas perez to head the labor department. >> we wondered. >> an airplane guy. >> if we were going to pull back, we wondered where it was going to come from. but this doesn't change that we're still -- the dollar has been thrown away, the best house in the neighborhood, things here are still going better. so the question is, does europe still have the -- >> i think people watching this will buy on the dip. >> we'll see. we are track ago global market sell-off. futures now are down triple digits down in the urch. we'll see whether andrew is right, whether this is seen as a way to -- you know, if you missed the train after it left the station. but the trigger, this bailout in cypress means maybe it could
6:51am
happen elsewhere. an unprecedented tax on depositors, but you hear the music. first, we are going to talk about enterage, the movie. the man behind the successful hbo movie tells us what is next for your favorite characters or whether somebody else is going to play adrian's part and jeremy, too.
6:52am
no they don't. hey son. have fun tonight. ♪ ♪ back against the wall ♪ ain't nothin to me ♪ ain't nothin to me [ crowd murmurs ] hey! ♪ [ howls ] ♪
6:53am
acceler-rental. at a hertz expressrent kiosk, you can rent a car without a reservation... and without a line. now that's a fast car. it's just another way you'll be traveling at the speed of hertz. a talking car. but i'll tell you what impresses me. a talking train. this ge locomotive can tell you exactly where it is, what it's carrying, while using less fuel.
6:54am
delivering whatever the world needs, when it needs it. ♪ after all, what's the point of talking if you don't have something important to say? ♪
6:55am
"entourage" fans rejoice. the long-time series is hitting the the big screen. executive producer and director of the hit series is parentally still up even though it was a sunday night. doug, how are you doing? >> i'm doing good. never went to sleep. how are you? >> good. i miss everyone. i would hate to see anyone not part of this. where are we on getting all the talent signed up? >> they're working on it now. there won't be a movie without them all. >> i don't imagine it without lloyd. he may be the first guy you have to sign. >> yeah. we're going to have to work on that as well. hopefully we'll have the whole group back. >> i knew you were going to do this. you don't want to wait too much longer. the half-life on this is dated.
6:56am
did you write the script? >> i wrote the script, did a few drafts. i took about 10 months off away from it. i worked on it 10 years on it before i got into the script. >> it would be dangerous if it was all you. did you hear that young co-author. i can't remember. she was great, though. >> allie. >> allie and rob were around to give me their input. >> doug, it's really exciting in the sense that "entourage" hasn't gone away. you're slammed for cameos all the time. i wanted to confirm that joe would get his two lines. >> i'm not coming back to you this time. i divorced you. i've listen to you. you got me back into the bedroom before and had your way. and then nothing happens with me. >> i'm representing you on this
6:57am
one, joe. no worries. we're going to go out to california. one thing on the business front, doug partnered up with us on a spin studio business. we're taking one out to l.a., wisconsin, university of texas, nashville. it's an exciting business. >> what is it? >> sort of your soccer mom spin class. we have a studio we're workshoping out in the midwest. we have a great group behind us. >> always starting new businesses. >> i can't help it. andrew and becky, we're going to have a little business arc in the show. i have seen the business draft of the show. you get the nonspeaking part. >> that's just like the show. >> yeah.
6:58am
>> learned from you. >> so 40. i thought that was your thing. i don't know. what happened to 40? >> i did a pilot. and hbo and i don't see eye to eye on it. it's not going at this point. we're moving on to other things. >> i think that's good. judging by the movie 40, nobody wants to watch a bunch of geezers. >> i have a quick tv question for you. i just saw "house of cards." there is this new way where people will download the 13 episodes and watch the whole thing. what does it do to the story telling? >> the story telling is a whole different thing. but the business, i don't know. i watched the whole thing in a weekend. people can pay eight bucks to see that type of show. i'm not sure about the business aspect. >> doug, thanks for calling in. break a leg.
6:59am
we're looking forward to it. >> thanks, guys. >> when we come back, we'll talk more about this morning's new top story. we have the details and why you should take notice. clients are always learning more
7:00am
to make their money do more. (ann) to help me plan my next move, i take scottrade's free, in-branch seminars... plus, their live webinars. i use daily market commentary to improve my strategy. and my local scottrade office guides my learning every step of the way. because they know i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade... ranked "highest in customer loyalty for brokerage and investment companies." a brand new start. your chance to rise and shine. with centurylink as your trusted technology partner, you can do just that. with our visionary cloud infrastructure, global broadband network and custom communications solutions, your business is more reliable - secure - agile. and with responsive, dedicated support, we help you shine every day of the week.
7:01am
7:02am
the wall of worry in cypress. what it means tore your money here. the very latest details from "squawk box". we're following the money trail. get ready for "squawk"'s first money matchup. which company takes it all. we'll explain as the second hour of "squawk box" starts right now.
7:03am
>> good morning, everybody. welcome back to "squawk box" on cnbc. and there is a selloff in the global markets this morning. the reason is cyprus. depositors to contribute towards a bailout. the depositors being forced to pay. this is an unprecedented. cyprus deposit haircut brailleout and risk-on trades. jim o'neill said this is a big one. michelle will will join us with all the little details on the stories and just a moment to lay out exactly what this means, what the ripple effects are as well. before we get to that, let's check out the global market
7:04am
reaction. the euro has stabilized some at this point. earlier it was looking at its biggest one-day drop in a year. investors raising serious questions about what this means for the future of the euro. in europe, the markets are trading lower. in france, the cac is done 1.4%. ftse off by 1%. dax just over a percent. in asia overnight, a significant decline in the nikkei. it was down 2.7%. and here in the united states the futures are also under pressure. dow futures down by triple digits, dropping 97 points below fair value. s&p futures down 15 points. 10-year is yielding 1.93%. of course as the dollar has strengthened you have seen oil prices drop. they're down to 92.40.
7:05am
gold prices are up by almost $10 to 16.02 an ounce. michelle has more details on what this means and how it will happen. >> so what happened in europe over the the weekend was dramatic and potentially traumatic. there was a bailout. that's not a big deal. it was for cyprus, a tiny country with a gdp less than the size of vermont. that's not what's significant. it's the way they imposed the bailout. european union wanted to make sure they got money out of cyprus. the only way was in the deposits of the banks. they imposed a tax on people's savings and checking accounts. if you had above 100,000 euros, you would get taxed at 9.9%. here's the significant point, though. if your account was below 100,000, which is the threshold for insurance which in theory if the bank failed you were protected 100%, you found out that you weren't.
7:06am
you woke up in cyprus and found out they would take 6.75% of your money. there was a huge cry across europe and cyprus as well. they said, wait a minute, if suddenly the insurance is no longer to be trusted, we may see bank runs in place like spain and italy. it was so dramatic. there is theoretically a new deal on the table in cyprus where they will have to vote in a parliament vote where accounts under 100,000 will be taxed at 3%. the other big point, they didn't do the traditional thing that you would normally see in any kind of banking recapitalization which is normally go through the equity. there's almost no equity left in the banks to go through. the junior debt holders. they're going to hit them but not 100%. so basically you violated the
7:07am
whole capital structure. >> where the money was. >> agreed. >> so there wasn't enough money in all those layers. >> it's aggressive, andrew. >> it's a model for us. >> i mean, i guarantee you they're scrambling at the white house right now. >> what i don't get is the fdic element, this idea of the insurance cap. i just think the confiscation of money, period, by the government, whether it was insured or not is almost beside the point. >> if a bank fails, people pay. if we have banks that fail -- small banks fail in the united states. if your money is above the threshold, you lose it. >> the post 2008 crisis period we learned we were effectively saving everybody across the board. >> all right. but here's what depositors in cyprus. cyprus has been asking for a
7:08am
bailout since june because they opened way too much greek debt. >> how much are depositors making? >> i think roughly 4%. so here's the thing, you've been keeping your money in there since june even though you know those banks are insolvent. why did you keep your money there? because you were convinced that the european union was going to bail you out. >> because you wanted the 4% is why. >> no. come on. if you thought they were going to take 10 you would you have kept your money there? no. as little as a month ago they thought it was possible but not probable that they would tax weighty depositors. this level of confiscation all the way down to the little guys -- hold on. russian ol' guards were trying to evade taxes and launder money. you want to bail them out? >> they're negotiating with russia now on their debt. >> exactly. >> so without screwing the ol'
7:09am
tkpwarbgs too hard you need to broaden the base. >> you could have confiscated only above the threshold. you would be taking 15% of your money. >> and mess up your negotiation for the -- >> the 2.5 billion. and hoping to get more out of them, right? >> so what does russia do here? >> russia has already said -- i mean, wouldn't you? money is piddly for russia. now you have a foot hold in the european union. >> there have been russians that bought apartments that are more an this. >> they could probably buy the whole island, yeah. understand this about the cyprus banking system. this is an important data point. it is eight times the size of the gdp. i said this last hour. i'll say it again. if our banking system were as big relative to our gdp we would need 45 more jpmorgans. >> jim o'neill on from goldman
7:10am
sac sachs. he said this is a biggie because you wake up in the morning questioning everything the eu was supposed to be based on. it stops. cross-border flows. >> if you had your money in a weak bank you have to ask yourself are my deposits going to get hit. now, there are people looking at the european union and saying that's exactly what should be happening. people should be differentiating. >> but do they wake up and think that in spain or italy? >> here's why in theory they shouldn't. let's put up this chart that barclay's put together. this is the relative size of the bailout. the huge long line is cyprus. it is the biggest bailout relative to the size. blue is official money. green is depositors. ireland is the second. >> will will people start moving their money here? >> it's quite possible because we have rule of law that's far
7:11am
more fendable. that's the other thing. when you don't go through the capital structure the way everybody traditionally expects you have a huge layer of legal unpredictability. >> like we did with the auto bailout. >> agreed, agreed. >> that was the same question with the auto bailout. if you're not going to follow rule of law, this is the only time that happens. >> just like they did here. >> i don't know. i'm still saying that it had to be something here to derail our bull market. this is not going to derail. >> i agree. we were waiting to see this morning would we see lines at banks in italy and spain. >> that would be bad. >> that would be bad. we haven't seen it. that's why we are coming off the lines. >> will you stay? >> i hear the hilton in cyprus needs refurbishing.
7:12am
>> we're going to add a few more voice to the conversation. our guest host this hour is ben pace. chief investor today. chief investment officer and wealth management also with us. a joy. david you. and ameriprize financial. you were kind of nodding. you get 10 straight records in the dow and everybody is waiting for something to come along to maybe cause a pull back. this looks like it's going to be it. but should it really be? >> many of us are sitting here waiting for something to pull back to be able to buy at a little cheaper prices. there's a sense that you're chasing now. maybe you see the same thing. the ecb and the eu and the imf
7:13am
are gambling a rain fence cyprus and that it's not going to extend to the other countries. so far so good as far as that goes. they're extending portugese and irish debt. it looks like spain and italy in their own worlds. that's the big gamble. it is something to worry about. >> it's psychological. >> greece or cyprus could turn into lehman brothers. it was a small investment bank. shouldn't have made that much of a difference. that's always been the concern. it dissipated a lot. they made the famous comment back in late july. that's probably going to still be the case. >> and the ecb has made that statement this time around. the number of airbuss they need to fly in, notes and coins. >> is it a little weird that
7:14am
they throw so much money in sort of an erratic way at the rest of europe. and they could have easily done this without spooking everyone. they could have bailed them out. >> you're bailing out weighty russians who sat around six months thinking you were going them but. >> this is something the germans said, look, you have to do this. >> the germans did not say you have to hit depositors below 100,000. that was the president of cyprus that wanted to do that. >> if they announced over the weekend they were hitting depositors over 100,000. >> only. >> only. would everybody be saying, great. we can live with that. >> to a larger extent, yes, i think so. you would have had a slightly different problem. the number would have been so big, 16, 17% you would have to worry about a run of larger depositors at big banks, right? >> all right. david joy, what would this cause you to do today, buy on weakness
7:15am
or lighten up? >> well, i think what it does is makes the u.s. market relatively more attractive. i wouldn't necessarily be buying here anywhere other than the u.s. market and maybe in treasure list, a little bit of gold. the big issue you've been talking about is how far does this spread. does cyprus get green fenced? if that's it, fine. this will not derail our bull market. but until that's determined, one of the big supports to this rally has been sentiment. and that's going to take a department here obviously. you're seeing it in market reactions around the globe. we have to make sure this doesn't go any farther than cyprus. stuart, in terms of how we measure gdp and our market here, in europe we care about it but
7:16am
we look to beyond to developing countries, asia. you have to connect a lot of dots even to have europe get hit hard by this. you have a lot of dots to connect before it takes a bite out of our gdp, don't you? >> i do agree this is small enough ring fenced. i think it's a terrible precedent. what i was thinking about as we approach the fed meeting in their minutes they said strains in global financial markets. so this is a train. even if it's psychological confidence factor. so going into the fed meeting this gives a little more ammunition to bernanke, probably dudley and jelin that have been saying 85 billion a month in quantitative easing should continue. even though this is temporary and does effect much u.s. gdp. >> so it's not really bad news
7:17am
but gives more to cover. so that's even good. we should band up today. >> i'm not saying it's good. >> i'm saying it's good. >> i'm just saying it will be very relative to the fed in their meeting in the next couple days which could be helpful to the market when the fed reminds everyone it's still quantitative ease full speed ahead. >> thanks. we'll continue with this. >> our conversation is going to continue on cyprus and the global market fears. just getting started this morning. we'll keep talking about it. find out what has been the pimco ceo most word. but there are opportunities to make money in europe right now. find out and how when "squawk" returns.
7:18am
7:19am
7:20am
welcome back, everybody. an unprecedented bailout in cyprus. our next guest is talking about what she is calling an opportunity of a lifetime. the perfect time to have her here. ceo of alternative asset management company. approximately $14 billion in assets. she was one of the speakers at the cnbc alpha conference. you liked european equities before. everything that sparked today
7:21am
with cypress. what do you think now waking up and hearing this news. >> we still like it. it's very much a stock picker's delight. you need to be able to see differentiation between issues. for example, february 1st the dutch government nationalized a bank. it went under the radar. nobody paid any attention. so this is not the first example of people violating the bankruptcy priority. so what they want to do is they want to prevent another. so you have good banks. one is the bank in denmark, conservatively run bank. it's down this morning only 1%. we make money off our hedge fund managers finding great stocks to buy. >> huge complaint is their banks have not done anything that the banks here have been forced to do. >> correct. they haven't been leveraged. this is a postponement of 2008 coming through. so the government has been signaling other moves in other stocks.
7:22am
so i like to buy things on a bargain when i go shopping. now is a great time to sit and do fundamental analysis. >> that is the huge caveat. this is not going and picking randomly through stocks. you have to really know the stuff inside out before you get involved. >> you have to do work to make money. what a concept. no, i agree. >> do you like french banks. >> i don't have any particular view on one general sector. it's bank by bank by bank. there's no easy trade here. >> are there any banks that you like in france. >> i don't have any off the top of my head right now. there's an italian company with 17% of the revenue comes from italy. so it's going to get sold down in the italian market. a german robotics company. a lot of revenue comes from outside the eu. it is giving a sale. it's really a great find.
7:23am
>> any hedging currency based on the dollar to the euro? >> yes. we go long and short. so on the net currency we tend to hedge it, yes. >> when you compare europe to the united states obviously the united states has come up pretty sharply. is that to say there aren't bargains to be found here anymore? >> there are some bargains. the pe here in the u.s. is still a couple points higher than over in europe. and so we actually are making most of our money in europe. and that still conditions. >> what kind of returns do you expect? you're different than the average investor looking for 5% to 8%. >> that's about where we are, 5% to 8%. >> looking across europe and ireland and other areas, where there other countries that you see? >> it's stock by stock. it's good fundamental analysis. where we're looking is more of
7:24am
the smaller, mid-cap type companies. everyone has been moving all this money around the global financial system doing slam trades where it is buy french banks, buy something, sell something in general. we're much more interested in fundamental analysis. >> how much do you think about the euro? we have watched a lot of volatility. >> it's hard to make a case that the euro is not going down. the question is, how far does it go down? and so i don't have a view. >> thank you for coming in today. good talking to you. one story you need to know about today. unusual bailout in cyprus. down triple digits. down 96 points or so. and that's after a great run we have had. "squawk box" will be right back. tdd#: 1-800-345-2550 hours can go by before i realize
7:25am
tdd#: 1-800-345-2550 that i haven't even looked away from my screen. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 that kind of focus... tdd#: 1-800-345-2550 that's what i have when i trade. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 and the streetsmart edge trading platform from charles schwab... tdd#: 1-800-345-2550 ...helps me keep an eye on what's really important to me. tdd#: 1-800-345-2550 it's packed with tools that help me work my strategies, tdd#: 1-800-345-2550 spot patterns and find opportunities more easily. tdd#: 1-800-345-2550 then, when i'm ready... act decisively. tdd#: 1-800-345-2550 i can even access it from the cloud and trade on any computer. tdd#: 1-800-345-2550 with the exact same tools, the exact same way. tdd#: 1-800-345-2550 and the reality is, with schwab mobile, tdd#: 1-800-345-2550 i can focus on trading anyplace, anytime... tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 ...until i choose to focus on something else. tdd#: 1-800-345-2550 all this with no trade minimums. and only $8.95 a trade. tdd#: 1-800-345-2550 open an account with a $50,000 deposit, and get 6 months commission-free trades. tdd#: 1-800-345-2550 call 1-866-516-0492 tdd#: 1-800-345-2550 and a trading specialist tdd#: 1-800-345-2550 will help you get started today. departure. hertz gold plus rewards also offers ereturn--
7:26am
our fastest way to return your car. just note your mileage and zap ! you're outta there ! we'll e-mail your receipt in a flash, too. it's just another way you'll be traveling at the speed of hertz. a talking car. but i'll tell you what impresses me.
7:27am
a talking train. this ge locomotive can tell you exactly where it is, what it's carrying, while using less fuel. delivering whatever the world needs, when it needs it. ♪ after all, what's the point of talking if you don't have something important to say? ♪ welcome back to "squawk box". our guest host deutsche bank's ben pace. what have we decided? if we miss the train leaving the station this should give us an opportunity? is that where we are? >> i think, again, a lot of us
7:28am
are waiting for bullbacks. i think there was a lot of problems that were checked off over the last six months. the euro crisis for one. >> the sentiment improved. >> the sentiment improved, no doubt. earnings were good in 2011. stock market wasn't. you could argue 15% was bay whack there. can you start getting multiple expansions from here. are these going to pop up to prevent that. we have been in a long-term bear market here. can we keep it moving. >> do you think this stuff scares people today? >> you know, i think it does temporarily. but i went to bed last night and futures were down 19. now they're down 14. i don't think this is going to be it. maybe brings back more concerns. makes europe reappear again. i think it would take much more than that.
7:29am
weaker economic statistics. problems with the congress debates this week. >> this is all you've got from me. >> yeah. >> i was more worried -- >> michelle brings up the point that we didn't see people waiting in lines. >> i was much more concerned something was wrong with this -- it's not. so stupid. >> we're going to take a quick break right now. we are just getting word that the cyprus parliament is postponing a vote on this bailout.
7:30am
t. all stations come over to mithis is for real this time. step seven point two one two. verify and lock. command is locked. five seconds. three, two, one. dragon is captured. is connecting today's leading companies to places beyond it. siemens. answers.
7:31am
7:32am
welcome back to "squawk box" this morning. global markets under pressure. cyprus considering seizing a portion of bank deposits to secure a eurozone bailout. michelle joins us now with more. good morning. >> hey, andrew. yeah, something unprecedented happened over the weekend in europe lead to go renewed fears of possible bank runs. the country of cyprus was bailed out. it was expected. that's not the surprising part. here is the controversial unexpected part. one of the conditions of the bailout, depositors in banks will have to give up some of their money even if the amount of money was below the insurance threshold me thought they had that they thought was protected.
7:33am
he has written extensively about the coming cyprus bailout. you've been writing about it for months. your initial thoughts on this deal? >> the initial thoughts are very clear. the least bad option for cyprus. they get a bailout. but part of that bailout is, as you said, a deposit levy. this deposit levy is really a way for the cyprian government to tax not just cpriates but foreigners with money in cypriat ebanks. they will have gotten 15% of gdp in tax revenues from nonresidents. this is money that's going to come not out of the pensions of cpriate retirees or other cuts in government expenditures. while it is a shock right now it
7:34am
actually in my opinion represents the best they could hope for. >> what about the fact that they hit depositors below the insurance threshold. that has been the most controversial part. would you agree the execution of this was clumsy. >> personally, while i had predicted there would have been this kind of deposit hit i certainly would have expected depositors below 100,000 to go free. seemingly it was the government who insisted on affecting also insured depositors because they were initially not willing to impose the losses only on uninsured depositors. seemingly the alumsiness is largely on the part of the cypriate government. >> we're extremely frightened of the russians for some reason because they hold such a large part of the deposits. why? >> i wouldn't say they're afraid of the russians. they basically wanted to be able to tax the russians. that's what
7:35am
they have done. but obviously starting longer term fear the russians are now going to take their money and leave which would lead to deposit outflows in the longer term from the cypriate banking system for a company that set itself up to be an off-shore banking center for russian businesses. >> the banking system is eight times the size of the economy over there. that is enormous. the banking system in the united states is only essentially equal to the size of our economy. >> they're not going to vote now until tuesday at 6:00 p.m. >> cyprus does not have the votes to get this passed. >> the controls that the european banks must have. >> there are some comments being made. >> all this money laundering. >> comments being made from a
7:36am
german official who is saying ecb has to develop a common approach. again, this is like trying to come up with the federal reserve after the the fact. >> let's address what andrew is talking about. how is it we get a banking system that is built so large because it promises discretion? in other words, it will look the other way when it comes to money laundering and tax evasion. that's how they attract, a, the deposits, b, the capital structure. it has no capital. almost no junior debt, equity wiped out long ago. how did they get here? >> this is a clear case of if it ain't broken we're not going to look at it. it's essentially the same model you have in a lot of offshore banking centers. switzerland, isle of mann. it's delaware. it's part of miami for latin america. >> exactly. how do they get into the eu? >> i mean, the reason they got into the eu in the first place
7:37am
was politics. it wasn't economics. it wasn't about the financial system. pit was politics. the statement reason greece got in. at the time there was a political will to have these countries in the euro area. and therefore in some way or another you decided to overlook some details. >> you said to some extent this is delaware and a bit of miami. what do you mean? >> what i mean by that is we have to remember cyprus is not just a sort of money laundering destination. it relies overwhelmingly on its very low tax rate. cyprus has a tax rate of 10%. it means it is tax optimization structures from russian businesses. they may or may not be money laundering but there is certainly tax opt mization. if you look at how delaware and parts of miami operate, kind of
7:38am
the same thing. >> there were fears we would see bank runs in italy and spain because people would wake up there and say, wow, if i'm in a weak bank and below the insurance threshold it is meaningless and they can take my money. will we see bank runs in other parts of europe? >> i doubt that it's going to come to that. it's clear this needs to be settled relatively quickly. the parliament has to vote. therefore if it takes only a day or two maybe. if it's settled during this week, i don't think you will have it. if you have a period of sustained uncertainty about this, days after days of lines on the television in spate and italy with people cueing up outside the cypriate banks then you get this fear. we will have a vote quickly because we're kind of in the situation we were in in the united states after the first tart vote here. initially parliamentarians will
7:39am
revolt. markets will respond. they will come back to reality. they will swallow hard and precedent. >> they were supposed to do it this morning today. now it's going to happen tomorrow night, they hope. so things aren't looking like they're making progress on that front. >> well, they're clearly right now tweaking the compensation part. because they the did have the saying, look, we're going to give these depositors bank equity. that doesn't obviously amount to very much. now they're saying maybe we should give them promissory notes, future gas receipts. we will tweak the numbers that are affected. we're going to hold the smaller depositors potentially unaffected while increasing on larger deposits. these are all things that need to be negotiated to get to the maximum necessary number of votes in parliament.
7:40am
>> thank you, jacob. great having you. guys? hello. >> okay. you're welcome. coming up, the european thing. equities on a role. are retail investors profiting? mitchell caplan of e trade financial. and mohammed el-erian will talk to us on the banking crisis and the implications for global markets and how to look around corners, which we need to do. >> find the show online and mobile. @squawkcnbc. squawk.cnbc.com. your investments and the information you need at your fingertips. "squawk box" on cnbc. profit from it. investor. yeah, i'm a serious investor
7:41am
7:42am
but i'm a busy guy. it used to be easier but now there are more choices than ever. i want to know exactly what i am investing in. i want to know exactly how much i'm paying. i want to use the same stuff the big guys use. find out why nine out of ten large professional investors choose ishares for their etfs. ishares by blackrock. call 1-800-ishares for a prospectus which includes investment objectives, risks, charges and expenses. read and consider it carefully before investing. risk includes possible loss of principal. ...amelia... neil and buzz: for teaching us that you can't create the future... by clinging to the past. and with that: you're history. instead of looking behind... delta is looking beyond. 80 thousand of us investing billions... in everything from the best experiences below... to the finest comforts above. we're not simply saluting history... we're making it.
7:43am
(announcer) at scottrade, our cexactly how they want.t with scottrade's online banking, i get one view of my bank and brokerage accounts with one login... to easily move my money when i need to. plus, when i call my local scottrade office, i can talk to someone who knows how i trade. because i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade. awarded five-stars from smartmoney magazine. checking futures right now. take a look where we are right now. we do look like we have red arrows after cypress news.
7:44am
dow looks like it will be off 90 points. s&p off 14 points. a couple other quick stops we should mention. i know we've been focused all on cyprus. but shares of boeing after lion air announced an order from rival airbus that could be worth as much as $24 billion with a "b." also constellation brands. anheuser-busch is making progress in talks with the justice department in amending the progress to buy modelo. the original deal could wind up with more talks. the markets may be riding a wave of record highs. not, though, according to our next guest. he says know. the retail investors is still largely absent. with us is mitch caplan.
7:45am
former ceo of e trade. good morning. >> good morning. >> i thought everyone said in the past month or two retail investors got in at least a smidge. >> interesting look back the the last 12 or 14 months. you would see the market doing well. over that period of time when you look at the sort of direct consumer models, ameritrades. it is flat or down. year over year. even month over month. i don't see it. >> give us a history lesson post bubble. we're thinking 2000-2001. when did the retail investor come back? >> so during the bubble i think in many ways the retail investor led. it was all the mania. you saw institutions sort of trying to trade off of retail behavior. and i think there has been inconsistency over these last 10 years of when it is the retail
7:46am
investors getting in, whether they're lagging, what's making their decision. i'll tell you what's more interesting. since i left e trade i've gotten involved with jefferson national. our distribution is through fee-based advisers. year over year where you have seen it down as much as 10% adviser-based trading is up 6%, 7%. >> that's a function of? >> i think that advisers are realizing they need to invest on behalf of their clients. they have to think about this long term. there's capitulation. they can't survive on basis points. so they're looking for products and services that give them the the ability to avoid the risk and volatility but still put money in. >> when do people come back on
7:47am
their own. >> i think they will. i think it will take ultimately long periods of uncertainly. every time the market starts to get volatile, retail investors draw. >> big institutions can play right through. >> every single day. they have the ability ultimately to say it's volatility. it's interesting. if you think of it on a spect m spectrum, it gives them a way to play the market. in the middle you have advisers who fear volatility. but understand their job is to build weight for their client and help them prepare for retirement at the far end of the spectrum i think you have the retail investor who has been so burned by this volatility. what does it mean in cyprus? what does it mean for the us banking system? >> the big volatility is down a lot. >> yes. >> it's down 11, 12. get a sense that the zero
7:48am
percent is finally burning a hole in investors pockets and they have to do something with it. >> as your volatility comes down. and also there's this huge focus on asset classes that are anti-correlated. people are trying to think of things that don't have that direct correlation. we have seen a huge balance mix, 50% at least in the bond market or alternatives. >> as former etrade man, if you're a retail investor not in the market do you want them back plain stocks every day or do you want them actually using an investment? >> i think you ultimately want -- whether they are self directed or whether they're using an adviser you don't want people active every day unless that's their job. >> not every day. but maybe says, look, i really think starbucks is on the move. for whatever reason.
7:49am
>> as long as your decision is because it's founded in research and you believe it is a good long-term goal for you because of your goals. you can be self-directed or you can be an adviser. in a lot of the models by etrade was a movement by even the pure self-directed consumer to recognizing that as they were building wealth they needed guided advice. >> you touched on something a moment ago. 50% is going into bonds and other areas. so the people who are getting in now are putting their money in bonds which every sophisticated investors said this is a bond bubble and get out. >> absolutely. >> so they're putting their money in the wrong places? >> well, certainly i see it on the direct consumer side. in our business when i look at the fixed income it tends to be much more short duration, much more focused on -- think of like alternative bond funds. a way in which they think there's less correlation and
7:50am
they are staying short because of what can happen with rising interest rates. as you start to build wealth you need that guiding advice. >> mr. caplan, thank you for joining us. >> thank you. >> take a look at the u.s. equity futures. the dow has been down almost triple digits for much of the morning. still down 91% below fair value. this is after a big run for the you to and s&p 500. dow was closing at a new record just about every day last week. cyprus considers seizing a portion of bank deposits to secure a eurozone bailout. we will talk more about that at the top of the hour >> up next, though, we are kicking off any awe series. "squawk" money madness. 16 of the most clicked stocks go head to head. you decide which advances based on performance for the rest of the year. round one netflix versus apple. ♪
7:51am
[ construction sounds ] ♪ [ watch ticking ] [ engine revs ] come in. ♪ got the coffee. that was fast. we're outta here. ♪ [ engine revs ] ♪ tens of thousands of dollars in hidden fees on their 401(k)s?! go to e-trade and roll over your old 401(k)s to a new e-trade retirement account. none of them charge annual fees and all of them offer low cost investments. e-trade. less for us. more for you.
7:52am
only hertz gives you a carfirmation. hey, this is challenger. i'll be waiting for you in stall 5. it confirms your reservation and the location your car is in, the moment you land. it's just another way you'll be traveling at the speed of hertz.
7:53am
7:54am
welcome back, everybody. the first round of money madness is netflix versus apple. you decide who advances. vote on our facebook page. joining us this morning on the "squawk" court is brett harris, search analyst. he covers netflix. and paul meeks who covers apple. gentlemen, good morning. welcome to both of you. tell us a little bit about netflix. where do you think it is heading? >> it's $10.5 billion enterprise company. three businesses. domestic streaming business, which only makes 100 million per
7:55am
year. the old buy mail dvd business which makes $5 million. and the international streaming business which loses 5 million. the old cash cow is running out steam. they're trying to switch over to the new screaming business. life could get tougher as some of the big companies get in the market through tv everywhere. at the current price, 190 we think the valuation is stretched. not a huge margin of safety especially with the increasing competition. >> you think it's 160. >> about 160. so below the 190 it's trading at now. >> did you see house of cards? >> i loved house of cards. >> is that helping them get business or no? >> originally their competitive advantage was they could better
7:56am
serve. they could personalize. that advantage is going to go away. they offer more on demand. hbo go is popular. they need to move into differentiated content. >> didn't they sign up more than expected in some business services. >> their q4 was a positive. that being said, they started the year with expecting 7 million net additions and revised that to five. so that was a big reason the stock ended up bottoming at 50. >> why don't we also bring in paul. you've been watching apple. paul, apple has been a founding story for so many people. first on the upside. and as it was on its way back down. where do you think it stands right now? >> we're pretty close to the trough in the name.
7:57am
what we need to see happen, however, is right now the annual estimate for earnings, this is a september fiscal year is about 44 bucks. i do think there could be some down side. they're at about the 40 level. the stock i think will launch forward. >> what's been so surprising about this, paul, it seems to defy any sort of rationality. people thought it was a cheap stock. now when it's so low you have other people who say there's nowhere to go but down from here. this is one stock that certainly doesn't trade simply on what you see in the numbers and earnings per share. this seems to be an emotionally charged stock. it's hard to say what's going to be driving it next, correct? >> sure. what happens is a case on wall street and always will be the case. it swings from grossly
7:58am
overvalued to grossly undervalued. once we get this blood letting of maybe one more cut in the estimates you will have a great long-term story, still at least mid-teens growth. when it comes to wireless, the most important part of technology this company accrues essentially all the profits despite what you see in market shares. >> paul, brett, gentlemen, thank you very much. you at home are deciding who advances. we will post a poll on our facebook page for three weeks of march madness you weigh in. the latest developments of the cyprus crisis. pimco's ceo will break it down in the next hour. omnipotent of opportunity. you know how to mix business... with business.
7:59am
and you...rent from national. because only national lets you choose any car in the aisle. and go. you can even take a full-size or above. and still pay the mid-size price. i could get used to this. [ male announcer ] yes, you could business pro. yes, you could. go national. go like a pro. yes, you could. a brand new start. your chance to rise and shine. with centurylink as your trusted technology partner, you can do just that. with our visionary cloud infrastructure, global broadband network and custom communications solutions, your business is more reliable - secure - agile. and with responsive, dedicated support, we help you shine every day of the week.
8:00am
♪ there'll be the usual presentations on research. and development. some new members of the team will be introduced.
8:01am
the chairman emeritus will distribute his usual wisdom. and you? well, you're the chief life officer. you just need the right professional to help you take charge. ♪ the worries unprecedented in cyprus. >> we're tracking the effect of
8:02am
the bank confidence across the eurozone. >> plus, pimco's mohammed el-erian will bring us more. the third hour of "squawk box" starts now. >> welcome back to "squawk box" here on cnbc. first in business worldwide. our guest host this morning is ben pace, u.s. chief investment officer and head of global investment solutions at deutsche bank. more in just a minute. first, though, becky has gone somewhere to read your morning headlines. >> over here. in the newsroom. that's right. and the big new sign behind us too. global markets this morning have been under pressure as cyprus is considering seizing a portion of bank deposits to secure a eurozone bailout.
8:03am
remember, this isn't just a move that cyprus came up with on its own. this tax is seen as necessary to try and win germany's approval for the bailout as well. bill gross tweeted risk on trade to the back seat. we spoke with jim o'neill early this morning. he said this is a biggie. check out the global market reaction you'll see at this point the euro has basically flat lined. it had seen its biggest one-day drop in about a year. just over a year, since january of last year. right now trading 129.44. in europe, the stock markets there are selling under a little bit of pressure. right now the cac is off by 1.25%. dax by 1%. in asia you saw a bigger selloff. nikkei down 2.7%. futures here this morning also under some pressure.
8:04am
you'll see dow futures are down 82 points. s&p futures down by just over 12. these are not the worst levels. we have seen close to triple digit losses for the dow futures. there is some concern. a big build for u.s. markets over the last 10 sessions or so. take a look at the 10-year. it is yielding 1.939%. oil prices have been under some pressure because of what's happened with the dollar and the euro. gold prices have seen some strength. they've been up by close to $10. gold right now trading at $1600 an ounce. michelle can lay out all the details of what this means. >> hi, beck y. when individuals with bank deposits in cyprus woke up saturday morning they were aghast to find out the government of cyprus had agreed to seize, they're calling it a
8:05am
tax. let's call it what it is. they agreed to seize $9.9 in accounts above 100,000 euros. and 6.75% below 100,000, which is the insurance threshold. that is the amount that's supposed to be protected by their version of the fdic. this led to huge controversy in cyprus and throughout europe. it led to long lines at atms. you could see them on twitter. it raised fears about whether or not we would see bank runs in other parts of europe. here's the significance. you're violating the concept of deposit insurance. it's an incredible thing to do. also, they did not promise to punish junior and senior debt holders in banks all the way to zero, which would have been the more legally predictable route. the finance minister in an exclusive with cnbc europe promised this was a one off. >> this was a necessary step to
8:06am
single shot at the problem and that from now on they can be very confident that nothing will happen to their savings. >> now, supporters of what's happening in cypress are saying that the reason they went after depositors is they wanted to be able to tax a lot of russian deposits that were in cyprus. think of it this way. you can tax depositors or you could tax the entire country. which would have spread the pain among tax payers. they started to spike on the fear that this could lead to a contagion. we haven't seen bank lines in italy or spain, which was the fear. it certainly raised a lot of concerns. >> let's also bring in steve leaseman and rick santelli for more reaction. why don't you start off with your views with what you're hearing from people there when you're looking attic movements.
8:07am
what really jumps out to you? >> i'll tell you what, and i am totally serious about this. when i walked in, this is a little earlier than our regular time. people are walking around, taking care of issues from friday. people have come up and said i understand this is a little island with a gdp that's in fan tess mal. i'll tell you what, i'm kind of shocked that it made that jump. i understand that at a time where computerization allows every government on the planet to track and have say complete financial audit trail of everything anybody has, whether it's in this country, 401(k), deferred retirement account. there's a rule of law issue here that's not only going to bug people in cyprus but it's going to bug everybody around the globe. that last comment you played is
8:08am
ridiculous, we'll never do it again. it is absolutely beyond belief. but this really is a shot across for anybody who has a deposit in any bank in the world, truly. >> it is one of those rare moments i agree with you. and i raised the question as to not just what were the cyprus folks thinking, but what were the folks thinking at the central bank, euro and imf. that's why i think we pay these people. and i think rick would have this study. he doesn't understand why we pay them at all. and i sort of agree with him on that. but that's why we think these people are around is in order to handle and think about issues of systemic risk. michelle has been on the right traffic. it's one thing if you tax people or seize money. that is not cyprus would not cause some form of a run idea or concept or panic on the part of individuals and this would
8:09am
ripple through. one other thing is the i.d. kwraes of this is the europeans had done a decent job to this point, calming things down. they moved away from the panic. and their capacity to snatch defeat from the jaws of victory has astonished me for five years running now. >> i would agree. it's that threshold level. my understanding is the president of cyprus absolutely did not want to go to a double digit. it's no first than the dollar store pricing everything at 99 cents. >> why eu allow that? and the imf. >> i think it's a lack of understanding about the importance of private property, of what insurance -- >> literally i had to read this through five times. >> if you look at the bank stocks, us bank stocks are down today. i would have thought they would have held up. >> because they would have been
8:10am
receivers of money? >> if you believe we have any rule of law we should be receivers of money, yes. >> andrew, you bring up the best point of all. you really do. the best point of all is we in the united states will look at this and it doesn't really apply. the way it applies is what you are basically leaning on. it can happen anywhere. more than that when you put your hands in a leadership that's political driven, political winds can change. here's a couple interesting facts. first of all, who puts all this money in a bank in a little island off europe? >> this is insolvent. a bank that they know is insolvent. >> that's part of it as well. but it goes to the whole notion we all should be careful when we put our fate in the hands -- that's why i don't believe -- if everybody looked at everything at total risk and saw through all the different insurances in
8:11am
every society they would actually be better off and they would be on the right track. >> insurance is only good up to the political will. >> right. >> to pay it is what you're saying. so everybody should be scared this morning. i'm not sure that's an accurate take on the united states, rick. and i really sincerely hope -- >> i'm not saying it's going to come here soon. but i think it's a lesson you need to be very careful. i'm a little surprised gold hasn't jumped up a bit. maybe that's a delayed trade. >> what about the long bond? >> it's about the same thing. we see yields moving down. that's the other point, andrew made. that's a great point. if you don't see a huge flight to safety it's because at the end of the day really what is safe? we're just arguing about degrees. >> you know what i thought you were going to say, rick, what the commentary on twitter was, we have issues here in the
8:12am
united states. it's zero percent interest rates. you get nothing. >> it's funny, michelle, on friday on "closing bell" when everybody was really insanely crazy about the wonderful moves in equities i said, we're going to have an arch duke ferdinand financial moment in europe at some moment. i didn't think it would be in 72 hours. >> you don't see the potential in what we will be able to do. we have infrastructure problems here. we could start there. what about alternative energy? we've got to develop that. i think we should start at 10%. you apparently are not on board with all the good things that we could do with a little confiscation. you're missing it entirely. what about the preschool stuff we were going to do. >> picky winners and losers, rewarding some at the expense of others is the common denominator. >> those people don't need that money. make it 10 million and do 20%.
8:13am
>> if you're over a billion -- >> for the record, joe -- >> you don't feel comfortable at 20%? >> i guarantee you they're strategyizing. >> i would not support any such thing. if i could just talk about another. is this like a king richard moment where they're going to lose a king? what are we talking about here, michelle? and is this another situation in terms of how much it would have cost the europeans to make cyprus go away. early on some of the bailouts would have been much smaller had they stepped ordinary and said if we stopped this here we won't have a rise in interest rates. >> other countries miss behave as well. you can't reward bad behavior on any level, especially on a financial level. >> the total bailout was supposed to be 17.
8:14am
>> right. >> so by the contributions of the depositors, they're going to privatize some industries, raise the corporate tax level. that got the european burden down to 10 billion. they're going to give 10 billion euros to a country with 8 million people. >> so hard the next 48 hours to convince everybody that it's a unique situation. that cyprus, eight times the gdp. >> it's a ridiculous comment. absolutely ridiculous comment. >> they point out they said the same thing with greece. that was a special case. >> everything is a special case. >> and we haven't seen a restructuring so far. >> i just wonder if they had taken the steps they needed to take in the last nine months. >> you're thinking the step was what, to give more money or to make sure they did not tax below the threshold? >> that would have been enough.
8:15am
>> at the end of the day, if you spent 20 billion euro toss stop what could happen today. i don't know what kind we're talking about in terms of loss of equity. >> you will never, ever have kids between credit risk. >> why did they have to do it? >> the etfs, another -- you know they securitized gold. the bulk of the people that believe the end of the world they want to buy gold. they invest in etfs. they still get their hands on the gold. it's going to affect your safety deposit boxes, your gold unless you have physical gold. this is a moment in time for people. >> everybody is so half empty. i look at this as a half full moment. there's a huge amount of potential for a lot of things we need to do. is the buffett rule that different? just take 30% or some type of
8:16am
wealth tax? this opens up enormous possibilities for the administration. >> treasury safe harbor, joe. you're on to something. we're supposed to be smart and can put it there, what an easy place to grab an extra 3%. >> bingo. we have been talking about it all evening long. >> steve is going to join us. >> andrew is at the table too long. >> you're all so negative. renewable energy from this. go ahead. bart chilton is on the attack. he's going after loss trading. he will explain next. and cyprus as well. and pimco's mohammed el-erian will help us break down the
8:17am
banking crisis. still ahead, how to profit from the rally in our what's working series. best investment from fund manager michael lipert. that's coming up at 8:40 a.m. eastern. ♪ [ cows moo ] [ sizzling ] more rain... [ thunder rumbles ] ♪ [ male announcer ] when the world moves... futures move first. learn futures from experienced pros
8:18am
with dedicated chats and daily live webinars. and trade with papermoney to test-drive the market. ♪ all on thinkorswim. from td ameritrade. ♪ i don't want any trouble. i don't want any trouble either. ♪ [ engine turns over ] you know you forgot to take your mask off, right? [ siren wailing in distance ] ♪ [ male announcer ] introducing the all-new beetle convertible. now every day is a top-down day. that's the power of german engineering.
8:19am
8:20am
welcome back to "squawk box". futures have improved again. down less than 80 before. now down 88. down triple digits at one point. we want to welcome back cftc commissioner bart chilton. high frequency traders or cheetahs in his cross-hairs. this time he's blowing the whistle on what he calls wash sales. here to explain it is bart chilton. bart, as we understand, you're still not enforcing the futures limits on the fed in terms of bond buying. >> as they say, i'm going to drop everything and do that for you right away, joe. >> they're at 70%. we're worried about 10% in the rap seed market. what's this latest thing with wash sales? >> well, these wash sales, joe, people know they're illegal. they're not allowed.
8:21am
it is when somebody trades with themselves. we discovered they are going on at this large, voluminous level. really to me a shocking level. and they're impacting what people see as volume. so this is an area we're going to review to ensure that markets are operating efficiently and effectively. who knows what sort of impact they're having. and it raises a host of policy questions we have out there. because this stuff just shouldn't be allowed. >> where would it cause the most harm if it was happening? >> well, there's a bunch of places that it could. they have this thing, joe, called ignition generation where it looks like people are starting to trade. but if they were just washing with themselves they might not be actually taking any risk of course. and therefore it might start others trading. so there's a bunch of different violations that we could be looking at. but the main thing for us is
8:22am
getting a beat on what's right and what's wrong. these market maker programs that are out there, where they pay traders to actually be in the market and trading, those are something that we really need to review more. and i'm calling for us to implement a new rule that standardizes these very complex. there's dozens of them, market maker programs to ensure there's no perverse incentives for traders to be washing in these markets. >> hey, bart, "the wall street journal" today talking about this issue. it says you're going to be able to detect this wash trading at the, "trading engine level." what does that mean? >> well, i mean, it should be detected with these self regulatory organizations. that is what we call the the exchanges. and these are occurring at such a large rate, andrew that certainly they should be able to. i can't imagine at the quantity that i'm seeing that they don't know this is occurring. again, they're illegal.
8:23am
we have to look and see what's actually going on. as i say, review it to make sure they remain efficient and effective. >> bart, what do you think about what's happening in cyprus today? as a regulator i think you would be taking notice. the idea of taking deposits from the bank to cover for part of this loan to the eu. >> yeah. i mean, all of this is very high-wire finance stuff. we have to keep our eye on the ball both here and in the eu. we know we're going to work out without taking too many gambles. but, yeah, absolutely need to keep our eye on it, becky. >> hey, parking lot, one other question while we have you. on friday, sac capital settled without admitting or denying guilt. there's a real debate about whether settlements like this, putting the money part apart, admitting or denying guilt,
8:24am
should be allowed. what's your take? >> depends how much money you're getting in the settlement. >> should the money be the answer? >> in part because that's where it really counts. there's reputational risk where people fall on the sword and say i did it. really what they care about the most is the pocketbook. so when you get these large settlements like we have had with barclays, rbs, ubs, that really matters. all too often, joe, and guys, it really does come back to the money. that's why i've said that our penalty regime needs to be updated. right now we only can penalize 140 k per violation per day. that's crazy. it should be a million for an individual trader, million dollar penalty and 10 million for an entity. we need to update this so these penalties mean something. and the last thing, we should actually put people in jail. the justice department should. >> is that enough money for
8:25am
steve cohen? that's half a year's salary for him. >> depends how many times you count a violation, right? if you count it every second it could add up quick. >> cheetah traders is 70-year-olds and above. where is the the cut-off, do you know? >> you're the expert on the cheetahs and the cougars. i'm going to stay away from it. i'm going to keep my eye on the regulatory stuff. >> we know our demos here. i don't care how old. thanks, bart. see you later. >> take care. >> when we come back, pimco's muhammad el-erian will be skwroeupbgs. joining us. it's lots of things. all waking up. connecting to the global phenomenon we call the internet of everything. ♪
8:26am
it's going to be amazing. and exciting. and maybe, most remarkably, not that far away. we're going to wake the world up. and watch, with eyes wide, as it gets to work. cisco. tomorrow starts here. no they don't. hey son. have fun tonight. ♪ ♪ back against the wall ♪ ain't nothin to me ♪ ain't nothin to me [ crowd murmurs ] hey! ♪ [ howls ] ♪ zap technology.
8:27am
arrival. with hertz gold plus rewards, you skip the counters, the lines, and the paperwork. zap. it's our fastest and easiest way to get you into your car. it's just another way you'll be traveling at the speed of hertz.
8:28am
welcome back to "squawk box", everyone. we have shown you how cyprus, the bailout story has been impacting the stock market overall. it's hitting bank stocks in particular. they are down across the board in premarket trading. cyprus would tax as part of a 10 billion euro bailout. maybe money would be coming to some of these banks where the laws are firmer and a little more set in stone. in any event you can see some of the stocks are down.
8:29am
citigroup down 1.8%. when we come back, the cyprus effect on the eurozone. mohammed el-erian will join us. and we'll continue our what's working series. . a brand new start. your chance to rise and shine. with centurylink as your trusted technology partner, you can do just that. with our visionary cloud infrastructure, global broadband network and custom communications solutions, your business is more reliable - secure - agile. and with responsive, dedicated support, we help you shine every day of the week.
8:30am
8:31am
8:32am
welcome back to "squawk box". cyprus sending a shock wave through the markets today. mohammed el-erian. how big of a "game change"er is this? >> it has two aspects. if you think of it, becky, europe lit the fuse to two sticks of dynamite. one is clear. dynamite in cyprus. by including the small depositors they are risking social unrest, political disorder and potentially an exit from the eurozone. they want except the small depositors. and they should. they should tax the bigger ones and exempt the smaller ones. the other is much more complicated and more uncertain. and that is a question mark about the sanctity of deposits in europe. and it's a reminder that europe
8:33am
has too many objectives and too few instruments. it is failing europe. and the ecb is going to have to do more. >> so we were waiting this morning to see if there would be lines forming outside italy or spain. that hasn't happened. does that mean the worst case skin narrow has been averted? some are remaining calm. or is there potential other things could develop. >> it's really good news that it hasn't happened. it is really difficult to contain. it is very important that it hasn't happened. but it's too early to declare victory. there's a lot of hope that the cyprus and europeans will come up with a better solution. this is something you need to monitor quickly. >> mohammed, when you were here with us on the set during the
8:34am
final crisis in the united states must have been 2008 or 2009 there was a point you said, you know, i'm thinking i should be taking money out of the atms at this point. is that this stage in europe? would you worry if you did have money in the european bank? >> no. i think the central banks are much more engaged. so the central banks have understand the lehman moment and do not want it to happen again. i think it's a different threat this time. it's much more that citizens are losing confidence in the established political order and political parties. and the fear of europe is the rejection of people of the system. and that's important because, remember, the ecb is buying time for the political system to heal and for the economic to heal. but if people don't trust that system it's going to be
8:35am
problematic. >> we're told part of the reason also is that germany is calling some of the shots on this. they can't sell this to their citizens anymore who are sick of bailing out everyone else while they continue to work so hard. there's the sick of bailing everybody out factor. so you have citizens with a lot of different goals in different countries. >> absolutely. too many objectives, too few instruments. so you have to make compromises. and the compromise on saturday was a particularly sloppy compromise. the fundamental point, becky, you're absolutely right. too many objectives and too few instruments. >> we feel good about ourselves. it never happened here. we're so solvent. is there anything to the notion of ask not for whom the bell tolls. i like at our entitlements and the fed and the amount of money returning globally. i wonder when the bailout entity needs to be bailed out.
8:36am
the last resort. you've seen guys like faber or all fiat -- is there anything to the notion that we're all eventually just headed for the same place? should we worry about that? >> so, joe, the big difference is we are healing economically. so there is hope as long as congress doesn't mess things up you can hire assisted growth and that handoff should help the longer term. but have no doubt you are being financially repressed right now, joe. you're being financially repressed by artificially low interest rates. and the idea is for you as a saver to subsidize. >> that's what i mean. we don't know that we're getting it but it's happening to us too. >> it's one of the tools they have. financially repressing.
8:37am
they control the policy rate. they can buy securities. the fed has done all three. >> you know the folks at the imf. can you explain how they would go along with something like this? >> i can't. i can't, andrew. i think this was a compromise, negotiated, really late at night. nobody stood back and thought, what are the consequences. they had a number they needed to meet, the 5.7 billion. they had to meet that number. and they said the details, you work it out. and no one looked at the details. and the problem of the details are really problematic. >>. >> you don't think this was part of the conversation? >> i think the big conversation was about the big burden. how much should be shared by the imf and the eu, 10 billion euros. and how much should cyprus come up with between a bank levy and
8:38am
privatization. >> how much do you think was supposed to be a stick in the eye to the russians? >> i think part of it is -- i think it's more a stick in the eye of all those who believe cyprus is a safe and lax jurisdiction. in terms of off-shore banking. i think europe had a different agenda also, which is, hey, look, we no longer are going to allow money laundering. and the other is let's give a signal to economies that have become incredibly complacent. >> who do you look at next? do you look at latvia? >> no. what you look at is what becky said earlier in terms of systemic, bank deposits in the other peripheral economies. do they remain stable or start flowing out again? now, having said this, tomorrow's parliamentary process is cyprus is going to be the focus. the worst outcome is you get
8:39am
completely political breakdown. you get social unrest. and then cyprus is forced to exit. i don't think it's likely, but keep an eye on it. >> this has been paced from deutsche bank. could this event hasten the process towards bank unification? we think that has to happen in europe so you don't have these one off situations. >> think of europe being on this journey towards what the british call a t-junction or fork. at one end is good outcome. political union, fiscal union. on the other end is segmentation and disorder. what this has done is accelerated the journey to that fork. so that's what this action is cyprus is doing. accelerating the journey. >> it's a stark reminder, mohamed this entire union was put together without fundamentals in place. we realize they didn't have something that could bring everybody together and make sure everybody was following the rules. this is another reminder of how
8:40am
haphazardly this was thrown together. absolutely, becky. >> is there a situation -- we spoke with jim o'neill from goldman sachs. he said he's been thinking an awful lot more frequently in recent weeks about how this makes him think this is a union that london would be better off not being involved with. this is not something that is doing anything about what it was supposed to be set up to do, which is to allow free trade. >> so that's another complexity. you have the european union with 27 members. and within that you have 17 members that are in the eurozone. the more the eurozone either implodes or unifies, the european union is going to the, wait a minute, i'm not sure i want to be in here. remember, for the uk europe is a means to an end. it's a means to more trade and therefore more growth. for germany and france, europe
8:41am
is an end to itself. it's political integration. a fundamental difference of philosophy. >> all right. we know this is a big mess. it's creating all kinds of friction and all kinds of problems. we don't know if it's going to get accepted or not. what should it do in terms -- what should it mean in terms of how investors look at the u.s. markets? we have seen a big run of 10 days in a row. does it make us more attractive or are we that tightly connected? >> the the fund memory hypothesis that has played out very well in u.s. markets is the following. the combination of economic healing plus a very active central bank will compensate for political dysfunction. and so far the markets have bought into that equation and it has sucked more money in. what this reminds you is every once in a while the political dysfunction is going to show up not only in the u.s. but it will
8:42am
show up in a bigger way in europe. i think on the whole right now unless we see deposit lines forming for the the u.s. this is not a huge issue. it's a big issue but not a huge issue. why? because the fed is really engaged. the fed cannot afford to see the crisis go down and the economy is healing. but there will come a time when we have to make that transition from assisted growth to genuine growth. there's a big question mark as to how and when. >> other times in the past when they started outpacing the u.s. you needle me about, hey, it's working. hopefully you're less euro centric in your thinking and you realize what an exceptional place you now call home here in the u.s. >> joe, it's always been an exceptional place that i've called home here in the u.s. i think it's important to remember that this global economy is extremely fluid. so we could also be talking about what's happening in the emerging world right now.
8:43am
we we are living in a fundamental phase of secular -- >> in a multispeak -- i know. i got all your jargon down. you're not going to take my bait. you're not going to admit this is the best system here. that's all i'm saying. >> no, no. i think the reason we are healing so much faster than anybody else is because we have tremendous innovation. what we don't have is a functioning congress. >> well -- >> as opposed to -- >> i don't know. how is the -- that's always your take. it's congress's fault they're not up against any tough guys in the white house? >> i think the whole of washington needs to -- >> now it's the the whole of washington. that's not what you said. thank you, mohamed. >> thank you, joe. >> he's mad. when we come back, we have more of our what's working series. the manager of the four star baron opportunity funds will
8:44am
join us with innovative names that could make you money. right now look at the u.s. equity futures. dow futures still down by 73 points off their worst sessions. s&p down 12 points. with fidelity's new options platform, we've completely integrated every step of the process, making it easier to try filters and strategies... to get a list of equity options... evaluate them with our p&l calculator... and execute faster with our more intuitive trade ticket. i'm greg stevens and i helped create fidelity's options platform. it's one more innovative reason serious investors are choosing fidelity. now get 200 free trades en you open an account.
8:45am
thank you orville and wilbur... ...amelia... neil and buzz: for teaching us that you can't create the future... by clinging to the past. and with that: you're history. instead of looking behind... delta is looking beyond. 80 thousand of us investing billions... in everything from the best experiences below... to the finest comforts above. we're not simply saluting history... we're making it. ♪ [ male announcer ] every car we build must make adrenaline pump and pulses quicken. ♪ to help you not just stay alive... but feel alive. the c-class is no exception.
8:46am
it's a mercedes-benz, through and through. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services. welcome back to "squawk
8:47am
box". our what's working series continues with the stock picker who is investing innovation. michael lippert of baron. good morning. >> good morning. >> we were talking cyprus all morning. this might be a nice prepraoef for us. tell us what you were looking at. >> my portfolio focuses on high growth innovative smaller mid-sized companies. they're more focused, more nimble, better able to attract talent. >> i see you don't like sisco or hp. you're buying guidewire. >> that's right. it's the rare large company that can integrate. the best example the last 10 years is apple. post steve jobs there is concern. it is a small entrepreneurial company that focuses on pnc
8:48am
insurance base. that is 30-year-old software. guidewire is right there. this is a business with less than $200 million in recurring revenues. their win rates are very, very high. well over 50%. so we see the pathway to at least a billion dollars of recurring revenue to be very achievable. >> and also gartner. >> information technology is increasingly strategic for all organizations. the pace of change is accelerating. you probably hair things of cloud computing and mobile and social and big data. and gartner is helping their customers deal with those changes. it sells under $30,000. it has a budget of at least a million dollars. what we really like is they are very much in the early stage of
8:49am
their opportunities. they have a little bit less than 9,000 customers a day. over 100,000 of 10 million or more. >> would you play google in outline of this? you're not doing some other big tech names but that seems like a name that keeps going. >> they are still innovating. but when you look carefully you see a lot of innovation is being supplemented with acquisition. android was something they acquired. google is not quite at a stage where you see sisco and certain others. they're still innovating but forced to acquire. >> i'm going to throw one last name at you. polypore. >> it is a more controversial stock. it is certainly for investors that have a much longer range outlook in mind. polypore sells the separators
8:50am
that go inside lithium ion batteries. >> the things that boeing is trying to separate in terms of the cells? >> yeah. inside the cells it celebrates the cathode. polypore has great technology that might have prevented what happened to boeing. but they do not sell to boeing right now. it is much, much harder than consumer electronics. polypore better suits that market. what we think is exciting is the company will earn $2 according to wall street. they have built capacity that will allow them to get to $4 of incremental earnings. you have to believe the next 5 or 10 years that less than 4% of the world's cars will have some form of electrification. to get to a double you only need a little bit more than 1% to go to electrification. >> michael lippert, thank you for joining us.
8:51am
>> thank you. >> cramer is going to join us next from the new york stock exchange. tomorrow on "squawk box", we'll talk jobs and the economy with guest host arianna huffing ton. and the squawk ceo call is in session. "squawk box" starts tomorrow at 6:00 a.m. eastern. 'm a conservat. but that doesn't mean i don't want to make money. i love making money. i try to be smart with my investments. i also try to keep my costs down. what's your plan? ishares. low cost and tax efficient. find out why nine out of ten large professional investors choose ishares for their etfs. ishares by blackrock. call 1-800-ishares for a prospectus which includes investment objectives, risks, charges and expenses. read and consider it carefully before investing. risk includes possible loss of principal. ♪
8:52am
i don't want any trouble. i don't want any trouble either. ♪ [ engine turns over ] you know you forgot to take your mask off, right? [ siren wailing in distance ] ♪ [ male announcer ] introducing the all-new beetle convertible. now every day is a top-down day. that's the power of german engineering. now every day anbe a name and not a number?tor scottrade. ron: i'm never alone with scottrade. i can always call or stop by my local office. they're nearby and ready to help. so when i have questions, i can talk to someone who knows exactly how i trade. because i don't trade like everybody. i trade like me. that's why i'm with scottrade. announcer: scottrade- proud to be ranked "best overall client experience."
8:53am
8:54am
i heard cramer. are you sure? i can test it right now. cramer, can you hear me? we'll go to ben pace instead. you haven't weighed in on any individual issues. you don't do that too much, right? >> individual stocks, no, not really. if i got compliance. >> can you at least tell us in this environment, the fed looks like the one thing we've learn side more cover for the fed. i don't know how bad it gets in cypress or whether there is contagion, but the fed will go. >> i think from the u.s. economic perspective, in the last few years of summer slowdowns, it doesn't look like
8:55am
that will happen and we're waiting for pullbacks and maybe we're waiting for an opportunity, but it will be time to wait for equities if you get that. >> i think cramer's here and jim, remember early on we were talking about whether the market knows things and it's like we were looking at that big job's number and we didn't talk about it after it happened and we got six or seven straight new highs and a fiscal cliff. is this what we're seeing today, enough to put anything on hold in your view or do things still look pretty good for our markets here. we did have a series and when you look at the charts this weekend, i cannot believe how many straight ups and take a boeing and it is bad news that indonesia did not go with boeing and that stock is up ten straight points and i'm looking at stocks like that to figure out what will happen and wells fargo up huge last week and we had big, big movis and think some of them have to be
8:56am
repealed. as far as cypress goes, did that raise your eyebrow? wouldn't you think they'd have a court where individuals could go to say are you sure this is legal and is it different over there? >> i mean, you put this thing on people who have a thousand euros there? look -- >> you have $400 or 400 euros you're going to pay. >> it is so stupid. even the german finance minister said it's stupid. they did give you 5%, but it's still a clip and you did get a higher return and this is about russian hot monoent and the people who live in cypress who wouldn't know howe how to put their money into the deutsche bank. >> it is about russian hot money. >> it's where they put their money and it's where they're laundering money and look, i listened to people over the weekend and it was incredible. i was trying to figure out how to do my brackets. i felt like i had to go to j.p.
8:57am
morgan, and i took out about $800. are we okay? >> jamie dimon has me worried. >> come on. there are people who are worried about their deposits here? it's the strongest banking system in the world. >> i've been asking the question all morning. can you explain why the banking stocks in the u.s. are down this morning? >> people like to take profits in the group. they still think we're completely interrelated like nothing's happened and they think our stress test did nothing. i saw a downgrade of cullen shares in texas and they'll say it's down because we didn't pull our money out of that. a little calm will help. i know last night the futures were completely hideous and the market was up so huge and you will see selling and big downgrades in the kimberly world, but i have to tell you, in the end, this is just a great excuse to take profits after we've had a gigantic move. >> what's your biggest upset that you're picking here. i was thinking villa nova.
8:58am
>> here's one, lasalle. >> over? >> just in terms of a total long shot. i don't know. >> i know more this year than i've ever known and because of that i think i'll do worse than i've ever done before. >> how about miami yesterday? >> they looked unbelievable. i was thinking their schedule wasn't as tough as other people and then i went -- you know who has really been coming on, lo s louisville. >> what a way to finish. they got kind of an attitude, got the fab five michigan attitude of the early '90s. >> i thought you throw those three indiana players together and they're unbelievable. wisconsin, i don't understand. >> wisconsin is coming in hot. i'm not going with gonzaga. >> i wonder about them, too, and their schedule, too. i don't know, they're pretty good. >> all right. >> thanks, buddy. >> all right. >> coming up, our guest host this morning has been ben pace
8:59am
from world management, we'll give him the last word when give him the last word when squawk returns.